Meet The Guys Behind 'Sharknado'

Dorothy Pomerantz
, Contributor[The Business of HollwoodOpinions expressed by Forbes Contributors are their own.

Enough said!

Last night, all anyone could talk about was Syfy's original movie Sharknado. Mia Farrow even tweeted of a photo of herself watching the made-for-TV flick with Philip Roth. (They weren't really watching it.)

The crazy concept movie about a hurricane that lifts a bunch of sharks out of the ocean could only come from one studio: The Asylum. While most of Hollywood is chasing blockbuster money or artistic integrity, the guys at Asylum are gleefully churning out low-budget B films that have helped make Syfy the home of the cheesiest films on TV.

Last year I met the guys at Asylum and filed this report for the magazine. My favorite quote: "We've never been about what the artist wants and I think that's the key to our success."

This story appeared in the October 22, 2012 issue of Forbes.

Seen the new Lincoln movie? You know, the one where Abe leads a ragtag band of soldiers against the undead? No, not Abraham Lincoln: Vampire Hunter. That was the $70 million
Fox film that grossed $100 million at the box office.

No, we're talking about Abraham Lincoln vs. Zombies. The difference? This one got produced for $250,000 by a tiny--but very, very busy--production company called The Asylum, and it grossed $400,000 or so.

Confused? That's okay, and maybe part of the point. In an age of 200-plus content-hungry cable channels plus
Netflix and Amazon, The Asylum is winning where mainstream Hollywood won't--or can't. Armed with distribution deals with Amazon, Netflix and Xbox, which buy all their products, partners David Latt, 46, David Rimawi, 48, and Paul Bales, 48, will churn out 28 films this year, compared with an average of 15 for the big studios. With titles like Mega Shark vs. Crocosaurus and Sex Pot , their movies don't win Oscars and they don't top the box office charts. But they do fill time, grab views from insomniacs and lard up video-on-demand libraries, an increasingly key metric in the escalating marketing wars between VOD providers. And they make steady money: The Asylum's total revenue for the last 12 months was $12 million, about the same as a big studio flop earns opening weekend but enough for a 15% profit margin. "Their movies get ratings," says Thomas Vitale, head of original movies at cable network Syfy, who buys about ten of their films a year. "The whole point of the Saturday movie is to provide escapism, and they're very good at that."

Their method is simple and cynically state-of-the-art: Customers tell them exactly what they want in a film, how much they'll pay for it and when they'll need it--and The Asylum delivers. Their average turnaround time for a movie is six months compared with at least a year for a major studio film. Average budget: $250,000--financed by cash flow. "We've never been about what the artist wants," says Latt. "And I think that's the key to our success."

The first incarnation of The Asylum was actually all about the artist. In 1996 Rimawi, who had lost his job with Australian studio Village Roadshow, started a business with Latt to funnel art-house movies to Hollywood Video stores. It was an admirable idea, but no one actually wanted to watch the films from first-time directors. Instead, Hollywood and Blockbuster asked for more genre films like horror flicks and teen sex comedies.

"We struggled to find them," says Latt. "When they were good, they were bought up by Lionsgate or companies that could offer more money. So we decided, why not make them ourselves?"

In 2004 Latt and Rimawi were working on a movie for Blockbuster based on H.G. Wells' The War of the Worlds when they heard Paramount had the same story in production with Steven Spielberg and Tom Cruise. They were prepared to kill their film, figuring no one would want a low-budget version when a $130 million version was hitting theaters.

They were wrong. "Blockbuster said, 'We want you to make this movie, ' " says Rimawi. "People were excited about the movie and not everyone was going to see it in the movie theater."

It was a direct-to-video hit, so they tried it again with King of the Lost World (based on King Kong ) and The Da
Vinci Treasures.

Today 30% of The Asylum's films are these so-called mockbusters (coming soon: Age of Hobbits ), and many earn them a sternly worded letter from a studio. So far there's been only one lawsuit. Universal complained that The Asylum's American Battleship used a title and art that were too close to the advertising for the studio's $210 million summer blockbuster Battleship . Latt and Rimawi changed the title to American Warships and altered the art just enough to satisfy Universal's lawyers.

"The studios are used to about 90% of their problems going away with one phone call," says Rimawi. "We're very familiar with the territory, and so is our lawyer. We haven't had any movie release dates pulled." Universal declined to comment.

Rather than rest, Latt and Rimawi are constantly innovating. Since VOD menus list offerings alphabetically, many Asylum movie titles now start with numbers, symbols or the letter A. One of their highest-grossing VOD hits is #1 Cheerleader Camp. Instead of Two-Headed Shark Attack they went with 2-Headed Shark Attack.

Latt and Rimawi say this will probably be the last year they produce 28 movies. Instead of doing 2 or 3 films per month, they're going to focus on fewer movies like the upcoming horror film #HoldYourBreath , which cost $200,000 to make but will actually have a theatrical release.

In true Asylum fashion, the shift has nothing to do with box office success. Cable companies will slot films that have been released in ten markets on the highly visible "In Theaters Now" section of the main VOD page. They plan to release #HoldYourBreath (note the hashtag ) in exactly ten theaters, one in each market. Welcome to the new Hollywood, baby.